United States District Court, W.D. Missouri, Western Division
ORDER DENYING MOTION TO STAY AND COMPEL
KAYS, CHIEF JUDGE UNITED STATES DISTRICT COURT
case is an insurance coverage dispute concerning an
uncontested $44 million judgment entered against Solaris
Power Services, LLC (“Solaris”) in the Circuit
Court of Jackson County, Missouri, in favor of Kevin and
Anita Johnson (“the Johnsons”) pursuant to Mo.
Rev. Stat. § 537.065. The judgment arises from an accident at
the General Motors Fairfax plant in Kansas City, Kansas, in
which Kevin Johnson, an electrician employed by Capital
Electric Construction Company, Inc., (“Capital”)
was severely injured because of Solaris's negligence in
failing to de-energize equipment on which he was working.
Capital was insured by Liberty Mutual Fire Insurance Company
(“Liberty Mutual”), and Associate Electric &
Gas Insurance Services, LTD. (“AEGIS”), provided
excess liability insurance to Capital. Plaintiffs Glen Simons
(“Simons”) and Solaris (collectively
“Plaintiffs”) allege they were, or should have
been, additional insureds under both policies, but both
insurance companies wrongly denied them coverage, damaging
before this Court is AEGIS's Motion to Stay and Compel
Arbitration (Doc. 86). Holding the policy's arbitration
provision is unenforceable, the motion is DENIED.
III and IV of the Petition are claims for breach of contract
and bad faith refusal to defend and settle against AEGIS.
Plaintiffs allege they were additional insureds under
AEGIS's insurance policy issued to Capital, and that they
were damaged by AEGIS's denial of coverage.
AEGIS excess policy at issue contains a Dispute Resolution
Condition which requires any controversy or dispute arising
out of the policy to be resolved through several steps, and
ultimately, mandatory binding arbitration. AEGIS Policy IV.
(R)(3) (Doc. 87-1). The same provision also states, “The
terms of this POLICY are to be construed in an evenhanded
fashion as between the INSURED and the COMPANY in accordance
with the laws of the jurisdiction in which the situation
forming the basis for the controversy arose.”
moves to stay the litigation and compel arbitration on the
grounds that its policy contains a mandatory, binding
arbitration clause. AEGIS contends that North Dakota law
should apply to this dispute, and that under North Dakota
law, the policy's arbitration clause is valid and
enforceable. AEGIS moves the Court to dismiss all claims
against it, or alternately, stay the proceedings against it
and compel arbitration.
Johnsons respond that the arbitration clause is unenforceable
because mandatory arbitration provisions in insurance
contracts contravene Missouri public policy. Alternately,
they argue that the contract also includes a choice of law
provision which directs that Missouri law should govern this
The arbitration clause contravenes Missouri public
federal court exercising its diversity jurisdiction applies
the choice of law rules of the state where it sits.
Prudential Ins. Co. of Am. v. Kamrath, 475 F.3d 920,
924 (8th Cir. 2007). A Missouri court will apply the law of
another jurisdiction so long as “this law is not
contrary to a fundamental policy of Missouri.” See
Sturgeon v. Allied Prof'ls Ins. Co., 344 S.W.3d 205,
210 (Mo.Ct.App. 2011) (declining to apply California choice
of law provision because it would allow an arbitration clause
in an insurance policy to be enforced, which is contrary to
Missouri public policy). The problem with the proposed
application of North Dakota law-or, for that matter, the
application of any other state's law that would enforce
the arbitration provision-is that honoring it would
contravene Missouri public policy.
435.350 of the Missouri Arbitration Act prohibits mandatory
arbitration provisions in insurance contracts. Id.
at 210. It states,
A written agreement to submit any existing controversy to
arbitration or a provision in a written contract, except
contracts of insurance and contracts of
adhesion, to submit to arbitration any controversy
thereafter arising between the parties is valid, enforceable
and irrevocable, save upon such grounds as exist at law or in
equity for the revocation of any contract. Contracts which
warrant new homes against defects in construction and
reinsurance contracts are not ‘contracts of insurance
or contracts of adhesion' for purposes of the arbitration
provisions of this section.
Rev. Stat. § 435.350 (emphasis added). “This
section makes clear that Missouri law deems arbitration
agreements in insurance contracts to be invalid” and
“contrary to Missouri public policy.”
Sturgeon, 344 S.W.3d at 210; see Standard Sec.
Life Ins. Co. of New York v. West, 267 F.3d 821, 824
(8th Cir. 2001) (upholding a district court's
determination that the Missouri Arbitration Act rendered an